QuantumScape (QS) stock price continued its freefall as investors dumped electric vehicle stocks after Tesla’s earnings. The shares ended the week at $5.84, down by more than 4% on Friday and 58% from the highest point this year. This decline has brought its total market cap to $2.8 billion.

QuantumScape is a company working on solid-state battery technology that it hopes will revolutionise the electric vehicle (EV) industry. The firm has spent billions of dollars in the past 13 years. 

QuantumScape hopes that it will start mass-producing its batteries between 2025 and 2026. It will then sell these batteries to OEMs in the industry, who will take advantage of its technology to build vehicles with longer ranges.

QS faces three primary challenges. First, the elephant in the room is Toyota, the biggest vehicle company in the world by sales. The company made a breakthrough in solid-state batteries a few months ago.

And now, according to the Financial Times, Toyota has made another manufacturing breakthrough. It is nearing mass production of these batteries at the same pace as the existing ones. It hopes to start doing this in a bigger scale in 2027.

Toyota’s batteries will have a range of up to 1,200 kilometers, double than the longest ones today. They will also solve the charging challenge of charging time since it will take less than 10 minutes for a full charge. 

Therefore, in addition to competition, more production of solid-state batteries by Toyota and CATL will reduce their prices. All this will likely have an impact on QuantumScape business.

Second, QuantumScape will need to raise additional capital since mass production of these batteries is highly expensive. The company recently raised $300 million to boost its balance sheet, diluting existing shareholders.

Finally, there are signs that demand for EVs is slowing. Tesla published weak financial results last week as its margins narrowed. Other companies like Xpeng, Nio, and Lucid have also struggled.

QS chart by TradingView

I have warned about QS stock a few times before. These warnings have been correct as the shares have plunged by over 50% in the past few months. On the daily chart, the stock has slipped below the important support level at $6.05, the lowest point this month. It remains below the 50-day and 100-day moving average.

The Relative Strength Index (RSI) has moved below the neutral point at 50. It is also nearing the crucial support level at $5.70, the lowest point in May this year.

Therefore, the outlook for QuantumScape share price is bearish, with the next level to watch being the psychological point at $5.0.

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